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THAILAND: Defaults prompt new student loan criteria

As the number of students defaulting on the government's low-interest student loan scheme increases, Thailand's education minister has proposed making government loans contingent on an applicant's future income and employment prospects. But critics say this could turn education into a commodity and could widen social inequalities.

Student loan defaults are a reflection of serious structural problems in the higher education system, which does not prepare students well for a changing world of work, one detractor argued.

Thailand's Loan for Education Fund has provided loans valued at over Baht357 billion (US$11.6 billion) to 3.7 million low-income students since it was established in 1996. While 60% of loan amounts due have been paid back, according to the fund's figures, defaults have increased.

More than 160,000 cases of loan default are currently going through Thai courts. Borrowers must pay back their loan within two years of graduation or face court proceedings. Another 500,000 borrowers cannot be contacted, adding to the overall default of up to Baht7 billion (US$226 million).

Education Minister Woravat Au-apinyakul said recently the main reason for the high level of defaults was graduate unemployment. Therefore revamping the loan scheme to make it contingent on students' future income could solve the problem.

Students pursuing subjects with good employment prospects after graduation will be given priority for loans under a new regulation Woravat said he had asked the Office of the Higher Education Commission to draft.

Under the reform of the loans system, a debt moratorium will be granted to defaulting borrowers who are unemployed and the ministry will provide them with job training.

Woravat said he hoped the new system, which would also be extended to middle-income families, could come into force before the beginning of the 2012 academic year.

Structural problems

But critics view this solution as peripheral rather than tackling the roots of the default problem.

Kasem Phenpinant, a philosophy lecturer at Chulalongkorn University, said the high level of defaulting stemmed from larger structural problems in Thai education including a rigidly defined system that does not correspond to the fast-changing labour market.

Rote learning is still highly prevalent in the Thai education system, Kasem said, but students should be taught how to think critically, so they use the skills throughout their working life.

"Education needs to prepare students to be flexible in a fast-paced work environment and for a second career in case they lose their job," Kasem said. "However, Thai education doesn't prepare students; it merely provides them with certification."

Kasem's research, "Liberal Arts Education", published last year by the government's Office of the Education Council, revealed that around 70% of undergraduates study social science subjects, with 30% of them choosing business administration and around 15% political science. Only 30% of undergraduates choose professional and science degrees.

Business administration has mushroomed in recent decades because of a "utilitarian way of thinking" among many education policy planners and executives, especially in private universities that focus more on technical and practical skills over creating a "body of knowledge", Kasem said.

"Business administration is perceived as a subject where, once you've finished, you can get into job market right away," he explained.

But he believes there is already an oversupply of business and political science graduates, in particular, while there is a shortage of graduates in subjects such as engineering or architecture, crucial for country's economic development.

ASEAN market

There are also problems with the quality of professional degrees and their ability to attract students. This is something the government should tackle in order ensure a well-qualified labour force when the 10-nation Association of South East Asian Nation (ASEAN) free movement of workers policy takes effect from 2015, Kasem said.

In 2015 doctors, nurses, accountants, engineers and architects will be among the skilled workers who will be allowed to work freely within ASEAN countries, creating more opportunities for those graduates as well as a more competitive environment.

Meanwhile research by the World Bank on higher education in East Asia, released this October, said a middle-income country like Thailand should provide more financial support and boost the quality of science, technology, engineering and mathematics education to benefit the country's economic development.

Social gap

Kriangsak Teerakowitkajorn, an economics lecturer at Bangkok's Thammasat University, said the government also risked turning higher education into a commodity with the new loan scheme's conditions, which could widen the social gap.

"Only students from higher income [families] will be able to afford to study social science and humanities because they don't need to worry that much about income," Kriangsak told University World News.

"Therefore those who come into research or academic institutions will mostly come from higher income families, which is quite worrying in terms of diversity."

Furthermore, making repayment prospects a condition for loan eligibility could mean more loans for middle-income students who have greater potential to repay.

The conditions of the new contingent loans state that any student, not just those from low-income families, are eligible for the scheme, provided they can prove a need and have good prospects of paying back the loan, which becomes due when the borrower's income is at least Baht16,000 (US$520) per month.

Amara Deeprasert, a first-year engineering student from Mahanakorn Technology University in Bangkok, said she welcomed the new scheme and conditions because the loans would not be limited to low-income families. Also, the repayment conditions would be less burdensome then conventional loans.

However, Narongchai Sena, a fourth-year science student at Surin Rajabaht University, regarded the loan conditions as discriminating against students who choose subjects not specified by the fund, and said it would affect students' choice of degree subject.

"Personally, I don't want the conventional student loan scheme to be abolished," he said "I'd prefer they increase the amount of loans instead of changing the conditions to make it more comprehensive, especially for low-income students."
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